Banks turn to Codat to help with processing tens of thousands of loans worth billions of dollars from COVID-19 related programmes
Codat – a London-based technology company that connects the internal systems of small businesses to banks, fintechs and other financial institutions, allowing business data to flow back and forth in real time – has raised $10 million in venture funding. The capital comes from international venture firm Index Ventures, the backer of Adyen, Plaid and Robinhood. The firm’s partner Jan Hammer and venture partner Stephane Kurgan join the board.
The new funds will help Codat expand to the US and grow to 100 people by the end of the year. This builds on its established success enabling 10,000 new small businesses each month to link directly to the 50 financial providers Codat works with. Among Codat’s clients are leading fintechs, insurance companies and banks, including iZettle, Experian, and two of the top four UK banks.
Codat uses a single API to directly ‘plug in’ to the software used by small businesses – allowing financial organisations to access everything from the company’s accounting software to payment terminals recording real-time transactions.
For small businesses who currently share this information over email and via unwieldy Excel documents and PDFs, Codat’s approach allows for radically simplified and improved interactions. This shifts the process of accessing capital from being a single point-in-time approval to a more responsive, proactive and ongoing relationship between the two parties.
For banks and fintechs, Codat allows them to scale and speed up their offerings to millions of small businesses. It equips them to understand the unique circumstances of each business, and to provide easier, faster and more tailored access to loans, insurance and other financial products. These improvements have been especially important throughout the COVID-19 crisis, when banks have had to handle unprecedented volumes of requests.
At one of the UK banks Codat works with, the company powered the entire loan application journey for COVID-related small business loans – cutting weeks off the ‘time to cash’ for recipients, and allowing the bank to cope with unprecedented scale in which they received the same number of applications in a week that they normally receive in a year.
Peter Lord, CEO and co-founder of Codat, commented: ‘The way small businesses interact with banks has been broken for a long time. They operate in a system that’s clumsy and unable to scale. Reviewing balance sheets, for example, soon becomes a nightmare of data requests and manual entry. Coronavirus has exposed those weaknesses for all to see, and accelerated the urgency of digitisation. At Codat, we’re trying to shift the model for business communication from being like exchanging letters in the post, to instead having an intelligent real-time platform that automates communication and builds trust between the parties.’
Codat was founded in 2017 by Peter Lord (CEO), Alex Cardona (COO) and David Hoare (CTO), who had worked together at what is now MarketFinance, a peer-to-peer invoice finance platform. With backgrounds in software engineering, the three saw that the way business data was shared from system to system. While consumers might enjoy the illusion of an instantaneous purchase in a shop, almost all transactions in the economy rely on a complex web of interactions under the hood – with invoices being raised, credit notes being issued, and huge databases being queried. Much of this information travels via humans attaching documents to an email.
Codat is one of a new wave of data infrastructure companies – in sectors as diverse as travel, hospitality and financial services – that work by creating a layer of connective tissue to let businesses talk to each other electronically. The surge of new software in recent years has generated huge quantities of fresh corporate data. However, it tends to be locked away in individual silos until companies like Codat make it legible and accessible via a platform. Once business data is made visible in this way such that other companies can ‘plug’ into it, it also becomes more valuable – because it’s no longer just about efficient communication in any given instance, but about being able to see a web of relationships within which banks and fintechs can spot trends and generate meaningful predictions.
In turn, this model allows Codat to benefit from network effects, with each customer increasing the density and value of the network for everyone else. For example, customers such as iZettle, who initially utilised Codat for connectivity, end up becoming data providers.
‘It’s simply luddite for so much business data to travel over email,’ says Jan Hammer, Partner at Index Ventures. ‘Codat represents a huge opportunity to increase the bandwidth and speed of business interactions. It makes data exchanges between businesses smoother and more responsive, as it allows systems to communicate electronically and seamlessly with each other in real time. We believe Codat represents a step-change that will dramatically expand businesses’ access to capital, customers and new commercial possibilities.’
Codat will imminently open an office in the US, and will be expanding its connectivity to a wider variety of data sources.
Codat is a London-based technology company that lets banks and fintechs plug into their small businesses and the software they use giving them seamless access to real time customer data.
Codat is building an ecosystem of connected datasets that handle the heavy lifting of integrations leaving providers free to focus on improving their offerings for small businesses.
Codat has over 50 clients globally, across various different industries from traditional lenders to invoice financing, insurance to cashflow forecasting.